How much money do we need
in order to remove a significant amount of carbon dioxide
out of our atmosphere?
And what are the mechanisms that we should use
to spend all of that money?
I'm the head of sustainability at Shopify,
a company you may not know but you might interact with every day
because our technology powers millions of online retailers.
In 2019,
we wanted to become a carbon-neutral company
and be accountable for all of our historical emissions.
Instead of buying typical, traditional carbon offsets
that simply pay someone else
to not pollute as much as we already had,
we actually wanted to delete our emissions.
It quickly became obvious that carbon removal,
those solutions that pull carbon dioxide out of the atmosphere
and store it safely,
were very expensive and in short supply.
So to kick-start this almost non-existent market,
we launched our sustainability fund
and committed to spend a minimum of five million dollars every year
on the most promising solutions.
Now, obviously we need deep emissions reductions,
I'm not disputing that.
But alongside this,
we also need to build the world's capacity
to pull ten gigatons of carbon dioxide out of the sky,
every year, by 2050.
Now, at the time, five million was a big number,
and it was a really big number to spend on something in its infancy.
And we thought we were doing something significant.
But then we totally hit a wall.
We weren't even thinking at the right scale.
We need to build massive facilities
capable of pulling one million tons of carbon dioxide out of the air
every year,
and we need thousands of them.
And in order to do that,
we need project financing of about one billion dollars per plant.
Now, to put that into perspective,
our five-million-dollar annual budget
would probably buy about 10,000 tons of carbon removal every year.
That's tiny.
That's only one percent of the annual capacity
of the size of the facilities we need.
And like I said,
we need thousands of them.
So we've learned that in order to move the dial on climate
and to build the necessary infrastructure,
we need more money,
way more money.
And in order to do that,
we need collaborations
and we need structures that leverage the significant power of capital
to create even bigger effects.
So now I'd like to tell you about what we did next.
It's a mechanism that we launched alongside four other companies.
It's an AMC.
AMC stands for Advance Market Commitment,
and this one’s designed to help guarantee a future market
for carbon removal by trying to de-risk the R and D investment
and capital expenditures needed to scale carbon removal
and grow that industry.
Now, why I think this is such a promising approach
is because it's not new.
AMCs have been used in the past in the health care sector
to encourage and accelerate the development of vaccines.
It worked by essentially guaranteeing
the economic viability of production by setting a price in advance.
This meant that companies could justify the R and D resources
needed to develop the vaccine
as well as the costs associated with bringing it to market.
They just needed to know that someone was going to buy their product
at a set price.
So this AMC borrows the idea
of a purchase guarantee
to try to accelerate the development
and scaling of carbon removal.
And to do that, we set up a fund,
and it's a pretty big fund.
It’s nearly one billion dollars,
and it's called Frontier.
But Frontier has to overcome some significant differences
between vaccine development and carbon removal.
First, vaccine development has been done for a long time
and we've largely worked out the supply chain
and infrastructure challenges,
the operational issues and the policy definitions.
But for carbon removal,
this is essentially still a new industry that faces all of these hurdles.
For example,
a lot of carbon removal technologies rely on clean power to operate
because if they don't,
they'll emit more carbon dioxide than they capture.
But clean power does not exist today at the scale and distribution we need.
Second, vaccines are developed by established companies
with deep R and D teams and experience.
Whereas today,
carbon removal largely exists on paper, in the lab or at the start-up stage,
there’s only a handful of companies worldwide right now
that are any further along.
Third, the manufacturing facilities for vaccines already exist at scale.
But for carbon removal,
the largest facility in operation today
is Climeworks’s as Orca plant in Iceland.
It has an annual capacity of 4,000 tonnes,
which is orders of magnitude less than what we need.
This means that today there's no company or facility in operation
that can respond to the demand signal of Frontier.
So to summarize,
for vaccine development,
all these companies needed as an incentive was a dollar sign.
They had everything they needed to jump into action and respond.
But today, carbon removal needs so much more.
Even though there's a lot of different ways to approach this,
I do believe that this is a significant market signal
that Shopify, alongside Stripe, Alphabet, Meta and McKinsey Sustainability
have committed to buying nearly one billion dollars combined
of the product.
But the carbon removal ecosystem is underdeveloped.
Even though Frontier is essentially helping to underwrite
all of the broad investment needed to scale carbon removal,
this is an imperfect application
of the advance market commitment mechanism
because the carbon removal ecosystem is underdeveloped.
However,
however, this is exactly what we need to do
to supercharge progress by accelerating innovation.
It is so important to take chances and to experiment.
And as buyers of carbon removal,
we have an opportunity to stand up
and do our part to build for the future,
and this commitment does just that.
So now we have Frontier,
which is the demand pull by providing capital and resources
through the advanced market commitment mechanism.
But what about the other side of the equation?
We also need a supply push.
To start,
in addition to all of the new climate companies being launched,
we also need companies from existing industries with transferable skills
to jump in and start developing carbon removal.
I'm talking about --
now, don't get mad --
I'm talking about industries like oil and gas,
mining, manufacturing,
infrastructure and electricity,
who all have deep experience building huge projects.
That's the massive scale that we need
that I was talking about at the beginning.
Alongside this,
we also need to build a robust management system
to ensure that all of these new carbon-removal solutions
are in fact capturing more carbon dioxide than they emit.
This is kind of along the lines of the quality assurance,
quality control and process trials we rely on
to ensure that our vaccines are safe
and that they work.
But most importantly,
we need more practice doing the actual thing
rather than trying to get it perfect on paper.
If we don't try, we can't learn,
and if we don't learn, we cannot iterate and improve.
This AMC is technology-neutral.
Frontier sends out the demand signal,
but we do not specify which technology should be used to meet it.
But what we do specify is the quality standard we expect
in order to ensure
that real, permanent carbon removal took place
at the agreed-upon price.
Now this arrangement, we’re hoping,
should encourage experimentation and tight iteration cycles
that should quickly separate the promising solutions
from all of the distractions.
Now, I’d like to ground this in reality by providing three solid examples
of companies who are already on their way
and some of them are actually doing the thing.
First, we have Climeworks, operating in Iceland.
They use direct air capture machines to filter carbon dioxide out of the air
and capture it for storage.
And they've now since broken ground on their next-scale facility,
which should be able to pull 36,000 tons of CO2 out of the air.
Next, we have Running Tide,
who sink kelp deep into the open ocean to lock away carbon dioxide
that's been captured through photosynthesis.
They’re currently working through their first-scale deployment,
and they're building all of the measurement,
quantification and monitoring systems
at the same time.
And third, we have Heirloom, who plan to accelerate
the natural capacity of limestone
to react with and capture carbon dioxide
and lock it away.
And now they plan to do this
by accelerating the natural absorption rates of the rock
from approximately a year to just days.
They're set to break ground on their first commercial-scale facility
in the United States in 2023.
Now, there are many other companies
that are starting to emerge that I could have mentioned here.
However, from these three examples,
what you can see is the diversity of solutions.
And we're agnostic about that.
All that matters is that they achieve the results within the set parameters.
Now, before I end,
I must address the question of our own operations.
So to start,
Shopify is a carbon-neutral company,
and we've committed to kick-starting the carbon-removal market.
Our business is all about helping millions of entrepreneurs succeed.
And today, they're experiencing so many challenges.
We have an opportunity to help them become carbon-neutral
and to leverage carbon removal
in order to future-proof their businesses,
which in turn safeguards ours.
Now, not a lot of them have climate teams.
But we have the opportunity to share our experience and expertise with them.
And so what we're trying to do
is take everything we've learned
about reducing and managing Shopify's emissions
and from vetting and buying high-quality carbon removal,
and we’re trying to take those lessons
and put them out on our platform
to make them available for all of our merchants.
Not only will this help reduce emissions,
but this will also help create
the very market that all of these new carbon-removal companies
who are building in response to Frontier's demand signal will rely on.
This is a feedback loop that will spur innovation
and drive the development of carbon removal
at the scale the world needs.
Thank you.
(Applause)